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How to finance your international ambitions

Exporting is in the spotlight for small businesses in Europe at the moment. A whole range of initiatives focus on encouraging international trade as the basis for “export led growth”. There is research to show that exporters account for 60 per cent of UK productivity growth; companies that start exporting experience 30 per cent and more growth in productivity.

Despite the opportunities associated with exporting however, many SMEs are still reluctant to go overseas – unsurprisingly, given some of the obstacles they face. These range from tricky market research and studying foreign legal systems to grappling with unfamiliar standards and cultures, not to mention the often complex administrative procedures associated with the exporting process.

Amongst all this, one significant factor that is often overlooked is finance, an area which can be notoriously treacherous for small firms. Moving your activities abroad adds an extra layer of risk, which means that a small business owner has to work extra hard to reassure lenders. 

Various additional considerations will need to include the creditworthiness of your foreign buyers (which is often more difficult to obtain than it might be for domestic ones), as well as the wider economic and political environment of the foreign buyer’s country of operation. 

On top of this, the foreign currency fluctuation and impact of additional risk on the cost of finance, as well as the longer lead times associated with shipping products and receiving payment will doubtless have an impact on the working capital needs of a mid-sized business.

We know that the UK lags behind the European average when it comes to SME exporting. But growth through exports is a reality for some of the country’s best performing firms the challenge now is to convince the majority of small firms that the opportunities can outweigh the difficulties.

To help reach that goal, here are my top tips for prospective exporters with concerns about how to financially manage their international ambitions:

The competition in global markets is tough and payment terms can be part of your competitive advantage, just like at home. Make sure that you factor in the longer lead times that can be associated with exporting and in turn the likely impact of this on your cash flow.

There are financial products available that are specially geared towards exporters

These can help you handle the extra risk associated with exporting by insuring your invoices against non-payment, export working capital loans and protection against foreign currency exchange rate movements. These products are unique to international trade, so do make the most of them;

Choose your bank carefully

Financial products related to exporting are likely to vary from bank to bank and making sure you go to a bank that is most geared to your export financing needs will be of paramount importance. This may even include branches in the country where you are looking to do business. Crucially, make sure you know the charges that apply to any specialist products they offer. 

If exporters are experiencing difficulty getting the support they need from their bank

The recently rebranded initiative from the UK Export Finance – with a clear remit to help small firms – might be able to help. Make sure that you remind your bank of the specialist government backed schemes that they are likely to have signed up to offer.

And don’t forget, while the agency’s remit is not supposed to support businesses who are exporting to any of the EU or OECD countries (which, after all, is likely to cover the majority of small exporters), if you can demonstrate that the cover you need is not available in the private sector, you may still seek the assistance you need from the agency.

Rosana Mirkovic is the head of SME Policy at the Association of Chartered Certified Accountants.

If you have an export success story to show for, you should nominate yourself for the Growing Business Awards 2012, as Export Champion of the Year.

Nominations are now open for the 2012 Growing Business Awards, in association with Lloyds Bank. We’re looking for entries from “future champion” businesses and individuals across ten categories. Created by Real Business and the CBI, the Growing Business Awards are the most established recognition of UK entrepreneurial achievement. 

The awards are also supported by Land Rover, the Financial Mail, Spring Law, Cass Business SchoolYour Business Your Future, Business Voice, Professional Engineering, and bdaily. As well as huge prestige and coverage, a group of successful candidates will also be invited to an exclusive “high-performance day” at McLaren Racing, as well as joining a delegation at the 2012 CBI Annual Conference. Nominations close on September 21.

Find out more about the Growing Business Awards online, or contact us via [email protected] or by phone on 0207 045 7600.


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